ET Now: Do you think in terms of growth, the most important number from State Bank of India is their NPA or the NPA quality?

Saday Sinha: Yes, you are right. We are expecting a marginal decline in NII. Sequentially, we will see around 4% increase in NII, but YoY we are expecting around 0.6% decline in NII. This is on back of compression in the margins. Last year, during same quarter, they had around 4.05% of NIM and this time we are expecting around 62-65 bps contraction in the NIM. So because of the NIM contraction, we would witness a marginal decline in the NII.

ET Now: You were maintaining a point that NPA quality could be worsening. Is it too early to assess that NPAs for State Bank of India have bottomed out?

Saday Sinha: They have crossed that 5% kind of a gross NPAs. So on the asset quality front that has almost bottomed out. But we have to watch out for restructured book. In the second quarter last year slippage declined from 10,800 crore in the first quarter to 7100 crore in the second quarter of FY13. However, the addition to restructured book spiked from almost 560 crore to 6700 crore. So the net assets increased from almost 11300 crore to 11800 crore. Although the slippage number was slightly down in the second quarter, but restructured book spiked. So, we have to be closely watching what kind of a slippage and restructuring they are announcing this quarter.

ET Now: Do you think that SBI on the asset quality front would perhaps be bottoming out? Do you think that there is a case building in terms from a value perspective for SBI?

Saday Sinha: On the asset quality bottoming out, yes that is a function of how economy is growing. Even when we are witnessing GDP growth coming down to, say, 5% kind of a level, this could impact the asset quality going forward. If there are accounts, which will move from one bucket, say, from 'sub-standard' to 'doubtful', then provisioning requirement for the banks will increase and that could keep their earnings under pressure. In this quarter, they might announce higher PAT because of the high other income, but going forward this same case may not continue.